Sun-Times red ink, questions mounting

November 09, 2006|By James P. Miller, Tribune staff reporter

Sun-Times Media Group Inc. on Wednesday reported a painful third-quarter loss and disclosed that directors have found preliminary evidence the company misdated stock-option awards from 1999 through 2002.

For the quarter ended Sept. 30, the Chicago-based newspaper holding company had a net loss of $34.9 million, or 43 cents a share, a deficit more than three times deeper than the year-earlier period's loss of $9.1 million, or 10 cents a share.

Three weeks ago, the parent of the Chicago Sun-Times and other Chicago-area newspapers had warned investors the latest results would be crimped by an accelerating decline in advertising revenue.

The company blamed its softening advertising revenue primarily on "weakness at the Chicago Sun-Times, as well as at publications in the southwest suburbs, including the Daily Southtown."

The company has "taken significant steps to improve our cost structure and address the challenging market and competitive environment," said Chairman and Chief Executive Gordon Paris. "There is more work to do."

Three years ago, a wide-ranging scandal broke over the company, then known as Hollinger International Inc. That's when directors forced out CEO Conrad Black after an internal investigation found evidence that he and certain other top Hollinger officials had improperly pocketed millions of dollars that should have gone to the company.

In the wake of that discovery, which has spawned a number of civil lawsuits as well as criminal charges against Black and other former executives, the board tapped investment banker Paris to become the troubled company's new CEO.

On Wednesday, the company unveiled yet another unsettling financial discrepancy: Sun-Times Media appears to have become entangled in the scandal over misdating stock options. That issue has drawn scrutiny from regulators and the Justice Department, has resulted in the departure of executives at several firms and has involved more than 100 companies, with that list expected to grow.

Sun-Times Media said outside directors are reviewing stock-option awards to executives and key employees through 2003, when it stopped granting options. Preliminary results indicate that some awards were misdated between 1999 and 2002, the company said Wednesday.

To date, it said, directors think the amounts resulting from option misdating "do not have a material impact on the financial statements for the relevant periods."

Still, if any of the misdatings turn out to have been intentional, Sun-Times Media pointed out, it might have to restate the results from that period even if the change isn't material.

Paris disclosed several weeks ago that he intends to "transition out" of the top job at Sun-Times Media by year's end. His successor hasn't been named, but the company said Wednesday that it expects to announce that appointment "shortly."

Sun-Times Media reported its results after the stock market closed. During the regular New York Stock Exchange session, the company's shares shed 10 cents, to $5.74.